UTICA SHALE DIVESTITURE AND POWDER RIVER BASIN UPDATE July 26, 2018

Transcription

1 UTICA SHALE DIVESTITURE AND POWDER RIVER BASIN UPDATE July 26, 2018

2 FORWARD-LOOKING STATEMENTS This presentatin includes frward-lking statements within the meaning f Sectin 27A f the Securities Act f 1933 and Sectin 21E f the Securities Exchange Act f Frward-lking statements are statements ther than statements f histrical fact. They include statements that give ur current expectatins, management's utlk guidance r frecasts f future events, prductin and well cnnectin frecasts, effects and results f the Utica divestiture, estimates f perating csts, anticipated capital and peratinal efficiencies, planned develpment drilling and expected drilling cst reductins, anticipated timing f wells t be placed int prductin, general and administrative expenses, capital expenditures, the timing f anticipated asset sales and prceeds t be received therefrm, the expected use f prceeds f anticipated asset sales, prjected cash flw and liquidity, ur ability t enhance ur cash flw and financial flexibility, plans and bjectives fr future peratins, the ability f ur emplyees, prtfli strength and peratinal leadership t create lng-term value, and the assumptins n which such statements are based. Althugh we believe the expectatins and frecasts reflected in the frwardlking statements are reasnable, we can give n assurance they will prve t have been crrect. They can be affected by inaccurate r changed assumptins r by knwn r unknwn risks and uncertainties. Factrs that culd cause actual results t differ materially frm expected results include thse described under Risk Factrs in Item 1A f ur annual reprt n Frm 10-K and any updates t thse factrs set frth in Chesapeake s subsequent quarterly reprts n Frm 10-Q r current reprts n Frm 8-K (available at These risk factrs include, satisfactin f clsing cnditins, actins by the buyer, the vlatility f il, natural gas and NGL prices; the limitatins ur level f indebtedness may have n ur financial flexibility; ur inability t access the capital markets n favrable terms; the availability f cash flws frm peratins and ther funds t finance reserve replacement csts r satisfy ur debt bligatins; dwngrade in ur credit rating requiring us t pst mre cllateral under certain cmmercial arrangements; write-dwns f ur il and natural gas asset carrying values due t lw cmmdity prices; ur ability t replace reserves and sustain prductin; uncertainties inherent in estimating quantities f il, natural gas and NGL reserves and prjecting future rates f prductin and the amunt and timing f develpment expenditures; ur ability t generate prfits r achieve targeted results in drilling and well peratins; leasehld terms expiring befre prductin can be established; cmmdity derivative activities resulting in lwer prices realized n il, natural gas and NGL sales; the need t secure derivative liabilities and the inability f cunterparties t satisfy their bligatins; adverse develpments r lsses frm pending r future litigatin and regulatry prceedings, including ryalty claims; charges incurred in respnse t market cnditins and in cnnectin with ur nging actins t reduce financial leverage and cmplexity; drilling and perating risks and resulting liabilities; effects f envirnmental prtectin laws and regulatin n ur business; legislative and regulatry initiatives further regulating hydraulic fracturing; ur need t secure adequate supplies f water fr ur drilling peratins and t dispse f r recycle the water used; impacts f ptential legislative and regulatry actins addressing climate change; federal and state tax prpsals affecting ur industry; ptential OTC derivatives regulatin limiting ur ability t hedge against cmmdity price fluctuatins; cmpetitin in the il and gas explratin and prductin industry; a deteriratin in general ecnmic, business r industry cnditins; negative public perceptins f ur industry; limited cntrl ver prperties we d nt perate; pipeline and gathering system capacity cnstraints and transprtatin interruptins; terrrist activities and cyber-attacks adversely impacting ur peratins; an interruptin in peratins at ur headquarters due t a catastrphic event; certain anti-takever prvisins that affect sharehlder rights; and ur inability t increase r maintain ur liquidity thrugh debt repurchases, capital exchanges, asset sales, jint ventures, farmuts r ther means. In additin, disclsures cncerning the estimated cntributin f derivative cntracts t ur future results f peratins are based upn market infrmatin as f a specific date. These market prices are subject t significant vlatility. Our prductin frecasts are als dependent upn many assumptins, including estimates f prductin decline rates frm existing wells and the utcme f future drilling activity. Expected asset sales may nt be cmpleted in the time frame anticipated r at all. We cautin yu nt t place undue reliance n ur frward-lking statements, which speak nly as f the date f this presentatin, and we undertake n bligatin t update any f the infrmatin prvided in this presentatin, except as required by applicable law. In additin, this presentatin cntains time-sensitive infrmatin that reflects management's best judgment nly as f the date f this presentatin. We use certain terms in this presentatin such as Resurce Ptential, Net Reserves and similar terms that the SEC s guidelines strictly prhibit us frm including in filings with the SEC. These terms include reserves with substantially less certainty, and n discunt r ther adjustment is included in the presentatin f such reserve numbers. U.S. investrs are urged t cnsider clsely the disclsure in ur Frm 10-K fr the year ended December 31, 2017, File N and in ur ther filings with the SEC, available frm us at 6100 Nrth Western Avenue, Oklahma City, Oklahma These frms can als be btained frm the SEC by calling SEC July 26, 2018 Update 2

3 UNLOCKING OUR FUTURE UTICA SHALE DIVESTITURE (1) Assumes flat 2018 cmmdity prices and basis differentials (2) Estimated at 1/1/2019 July 26, 2018 Update 3

4 UTICA DIVESTMENT OVERVIEW Buyer Encin Acquisitin Partners CHK UTICA ACREAGE POSITION Purchase price $2.0 billin ASSET STATS DEAL Net prceeds fr debt Ptential cmmdity price adjustment (expires 12/31/2019) $1.9 billin $100 millin Net cre acres 320,000 Well cunt (perated and nn-perated) 920 Net prductin (1) 107,000 be/d Gas / NGL / Oil 67% / 24% / 9% YE2017 Reserves (2) Future midstream and dwnstream cmmitments (assumed by buyer) 480 mmbe $2.4 billin 2017 EBITDA $455 millin OHIO CHK Cre Leasehld CHK Nn-Cre Leasehld 2017 Capex $471 millin (1) Fr calendar year 2017 (2) At 12/31/2017 July 26, 2018 Update 4

5 TRANSFORMING INTO A MORE COMPETITIVE COMPANY (1) (1) Gives effect t Utica Shale divestiture (2) Prductin expense, G&A and stck-based cmpensatin July 26, 2018 Update 5

6 POWDER RIVER BASIN PRODUCTION GROWING RAPIDLY ~90% OIL GROWTH YTD, ~100% EXPECTED IN 2019 (1) mbe/d Current field rate (2) Net Prductin (mbe/d) Q Q Q Q Q Q Q Q Q Q Q Q Rigs 4 5 Rigs Liquids Gas Analyst Day 2016 (1) Prjected annual grwth in 2019 cmpared t 2018 prjected annual vlumes (2) As f 7/24/2018, net vlume (3) Frecast presented at Analyst Day 2016 July 26, 2018 Update 6

7 TURNER LEADING THE WAY THE PREMIER PRB OPPORTUNITY Prgress t date De-risking acreage 18 Turner prducers t date TIL pace accelerating Infrastructure upgrades Testing spacing assumptins Current Rig Lcatin Turner Prducing Well Planned TIL 2018 Future Well Turner 20 ~$25/bbl breakeven (1) Turner TILs , Grss Cumulative Prductin (be) 250, , , ,000 50,000 CHK Turner Industry Turner 0 Q Q Q Q Q Q Q3 2018E Q4 2018E (1) Breakeven assumes a flat $2.75/mcf gas curve and a discunt rate f 10% July 26, 2018 Update 7

8 EXECUTING ON OUR STRATEGY Reducing leverage $2 $3 billin f debt reductin Ultimate gal f 2x debt/ebitda Enhancing margins Attacking all areas f cash csts Funding ur highest returning prjects Achieving free cash flw neutrality Imprved year ver year free cash flw due t reduced cash interest expense EHS excellence Cntinued cmmitment t imprving envirnmental and safety perfrmance July 26, 2018 Update 8